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Financial Times- New CD
electronic broker goes live.
A new electronic inter-dealer broker
for credit derivatives is set to go live
today. IDX Capital, a recent start-up,
will compete with existing platforms including
Creditex and GFI Group.
The launch reflects the potential opportunity
presented by the booming credit derivative
business and the increasing demand among
big dealers for technology to streamline
trading and processing.
The company was initially targeting inter-dealer
trading in New York. Its existing competitors
are believed to have had most success
penetrating the European market.
The IDX system will allow both voice-brokered
transactions and fully electronic trading.
But market participants noted that achieving
strong liquidity was crucial to any broker's
success. "It's a question of critical
mass," said a senior Wall Street
dealer.
Dealers are likely to scrutinize the
capabilities of the IDX system to simplify
and automate the settlement and processing
of trades. They are under pressure from
regulators to cut backlogs of paperwork
in the credit derivative market and automate
future trades.
The cost of trading on the IDX system
would be lower than its competitors, with
only the initiator of each trade being
charged a fee.
IDX will initially focus on single-name
credit default swaps, a type of insurance
against default by a single company. It
plans to expand later into other products
and markets.
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